The Loan Process

Are you pre-qualified or pre-approved for a loan?

Before you begin to shop for a new home, you should set up a time to meet with us so we can figure out how much you can afford.  This will put you in a better position as a buyer. That’s when it is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.

To get pre-qualified for a loan, we will collect information about your debt, income, and assets. We’ll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. We will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.

It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.

To get pre-approved, you will complete a mortgage application and provide us with various information verifying your employment, assets and financial status such as W-2 forms, bank records and credit card statements. We’ll review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.

A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.

What size monthly payment can I afford?

When determining what size monthly payment you can afford, you’ll want to consider what other monthly expenses you have.   Tangible expenses such as car payments, day care and utility bills, all play a role in how large a monthly payment you can afford.

There are also the intangible expenses or lifestyle expenses that youll want to consider.  Things such as dining out, travel and when you buy your next car can effect how much you can afford.  Are you willing to curtail or delay some of these expenses in order to afford a larger monthly payment?

We can answer any questions you may have about the mortgage process.  But the best way we can help is by getting you pre-qualified for a mortgage loan.  To get started, simply complete this form  to let us know a good time to contact you.

What does it cost to refinance?  What are the benefits?

Ever heard the old rule of thumb, you should only refinance if your new interest rate is at least two points lower? That may have been true years ago, but with refinancing dropping in cost over the last few years, it’s never the wrong time to think about a new loan!  Refinancing has a number of benefits that often make it worth the up-front expenditure many times over.When you refinance, you might be able to lower your interest rate and monthly payment — sometimes significantly. You might also be able to “cash out” some of the built-up equity in your home, which you can use to consolidate debt, improve your home, take a vacation — whatever! With lower rates and balances, you might also be able to build up home equity faster with a shorter-term new mortgage.

All these benefits do cost something, though. When you refinance, you’re paying for most of the same things you paid for when you obtained your original mortgage. These might include settlement costs and other fees, an appraisal, lender’s title insurance, underwriting fees, and so on.

You might have to pay a penalty if you refinance your previous mortgage too quickly. That depends on the terms of your existing mortgage. These penalties are illegal in some places, and more often than not when they’re there apply only for the first year or two. We’ll help you figure it out.

You might pay points to get a more favorable interest rate. If you pay (on average) three  percent of the loan amount up front, your savings for the life of the new mortgage can be significant. You should be aware that the IRS has recently said that points paid for the purpose  of refinancing your mortgage cannot be deducted in their entirety in the year you pay them, unless the refinanced loan is primarily for home improvements.  Consult your tax professional before deducting points you pay on your new mortgage from your federal income taxes.

If you lower your interest rate, naturally you will be lowering the amount of mortgage interest payments you can deduct from your federal income taxes.  This is another cost that some borrowers consider. We can help you do the math!

Ultimately, for most people the amount of up-front costs to refinance are made up very quickly  in monthly savings. We’ll work with you to determine what program is best for you, considering your cash on hand, how likely you are to sell your home in the near future, and   what effect refinancing might have on your taxes.